KRA Cracks Down on Small Businesses Evading Taxes

The Kenya Revenue Authority (KRA) has intensified its efforts to widen the tax net by going after small-scale businesses that have been evading taxes.

This initiative is spearheaded by the newly established Department of Micro and Small Taxpayers, which is specifically targeting businesses and individuals with an annual turnover of Ksh200 million and below.

Acting Commissioner George Obell stated that while small and micro businesses generate a substantial amount of revenue, many of them fail to remit the required taxes.

He pointed out that although a significant number of these businesses are registered taxpayers, their actual contribution to the national tax revenue is alarmingly low.

“If you analyze the tax contributions, medium and large businesses, along with government institutions, contribute approximately 86 per cent of the total revenue. The remaining 14 per cent comes from micro and small businesses,” Obell explained.

He further noted that the biggest issue lies in underreporting of income, with many business owners declaring much lower earnings than they actually make.

To address this, KRA has put new measures in place to ensure that tax compliance improves among small businesses.

The authority discovered that while many enterprises have obtained their Personal Identification Number (PIN), they either fail to file tax returns or submit nil returns despite being actively in business.

KRA’s Strategy for Ensuring Compliance

As part of its strategy, KRA is restructuring its operations across key areas such as revenue collection, technology, and customer service.

The goal is to build a more agile and efficient tax administration system that simplifies compliance for taxpayers while enhancing service delivery.

One major focus is the integration of advanced digital infrastructure to improve data analysis and automate tax collection processes.

To strengthen enforcement, KRA will closely track business transactions in key sectors, including transport and ICT, to ensure that all taxable income is accounted for. According to Obell, this involves capturing financial data from businesses at every transaction level and using it to assess tax obligations.

“For instance, if you provide services to an established company and that service is subject to withholding tax, we will deduct the applicable percentage and remit it directly to KRA.

We will also require your PIN to record the transaction and monitor your tax compliance,” Obell explained.

He clarified that the withheld tax, which typically ranges from three to five per cent, is not the final tax. Businesses will still be expected to declare their total income at the end of the tax period and file their returns accordingly.

Taxpayers Urged to Comply Before the June 30 Deadline

These new tax reforms are being implemented at a time when Kenyans are actively filing their annual tax returns.

KRA has reminded taxpayers that the deadline for filing returns remains June 30 and has urged businesses to comply with tax regulations to avoid penalties.

With the new strategies in place, KRA aims to boost tax revenue by ensuring small businesses fulfill their tax obligations just as medium and large enterprises do.

By leveraging technology and data analysis, the authority is confident that it will close loopholes in tax evasion and promote a fair and transparent tax system for all businesses in the country.

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